A Research On Credit Concentration And Economic Capital Management Of City Commercial Bank

Since the1980s, financial globalization and liberalization move forward, economiccapital has become the core of risk management. This management system can not onlyimprove the level of commercial banks’ capital management, but also promote commercialbanks to change to the modern bank, by playing the role of performance assessment andresource allocation of economic capital management in commercial banks. However, fromthe development history and experience lesson of international banking, banking crises inthe past have shown that concentration risk of credit poses a great threat on theirmanagement， the economic capital management of commercial bank is facing a newchallenge. City commercial banks are a special group in Chinese banking industry, thesmaller size and geographical characteristic increases the likelihood of higher concentrationof credit. The research of this special group on credit concentration, and then measuringeconomic capital more accurately not only can promote the transformation of economiccapital management of commercial bank, but also provide a reference to promote thereform of China’s financial industry.This paper reviews the domestic and foreign scholars’ research results onthe concentration of credit and economic capital problem, elaborates the meaning andrelationship between the concentration of credit and economic capital, lists several methodsof measuring the credit concentration, states advantages and disadvantages, as well as theirapplicability, introduces the classic economic capital measurement method and three newmethods to measure economic capital considering the credit concentration. On this basis,the first thing is to analyze customer concentration of Beijing bank, Nanjing bank andNingbo bank by using the proportion of a single customer, the proportion of tenbiggest customer and the HHI index; Secondly, using scale concentration ratio and riskconcentration ratio，industry concentration of these three banks is estimated and researched;Again, constructing ASRF model and the binomial expansion technique, economic capitalis calculated and compared. Finally, according to the results of empirical study, analyze thecauses and put forward the corresponding policy and recommendation.The results of the study show that customer concentration of these three banks isnot obvious, but the industry concentration is significant; the economic capital bybinomial expansion technique is greater than the one by ASRF model, which indicates thatcredit concentration risk is impact on economic capital; the risk management of city commercial banks is not in place, mainly for the provision of inadequate bank loan lossreserve.